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December 2017

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Pakistan Federal Tax Ombudsman (FTO) Abdul Rauf Chaudhry has assured the textile entrepreneurs in the country of taking up the issue of zero rating for the sector with Finance Minister and Federal Board of Revenue (FBR) Chairman Tariq Bajwa.

During a meeting with textile exporters from knitwear, hosiery, bedwear and cotton garment segment, Mr. Chaudhry said that sales tax levy on local sales of textiles and not on exports does not make a sense, especially when 90 percent of the textile goods are exported, necessitating refunding of sums so collected.

He also agreed with the exporters that even a nominal two percent sales tax levy on zero-rated sectors, automatically requires those industries to submit full accounts and other requisite details.

Stating that the textile industry is the country’s largest foreign exchange earning sector, Mr. Chaudhry said the textile entrepreneurs should be allowed to use all their resources to the optimum level, so that they can compete with regional competitors like India and Bangladesh. If the tax and refund issues persist it would result in contraction of exports and widening of trade gap as well as foreign exchange crisis.

Noting that around 80-90 percent cases dealt by FTO are decided in favour of textile entrepreneurs, he said that upon issuance of Refund Payment Order (RPOs) by FTO, the concerned department has to immediately release the payment, but if it fails to make such payment, exporters would have to bear the total cost.

Condemning the working of the revenue departments and piling up of refund and rebate cases with FTO, Mr. Chaudhry said in order to save time, it has been planned to implement the decision of FTO on one particular case to all such similar cases.

FTO offices would be opened in Faisalabad and Peshawar and the number of advisors in Lahore and Karachi would be doubled to ensure speedy processing of such cases, he added.

However, on the issue of blocked refunds of sales tax on services collected by the Sindh Revenue Board (SRB), he said that FBR would have to settle the refund claims by making internal adjustments.